a report on the audit of teacher retirement system's ... · mr. r. david kelly, chairman ms....

Robert E. Johnson Building Phone: (512) 936-9500 1501 North Congress Avenue P.O. Box 12067 Fax: (512) 936-9400 Austin, Texas 78701 Austin, Texas 78711-2067 Internet: www.sao.texas.gov

SAO Report No. 18-005

A Report on

The Audit of Teacher Retirement System’s

Fiscal Year 2017 Financial Statements

November 27, 2017

Members of the Legislative Audit Committee:

In our audit report dated November 20, 2017, we concluded that the Teacher Retirement System’s (the System) basic financial statements for fiscal year 2017 were materially correct and presented in accordance with accounting principles generally accepted in the United States of America. The System published our audit report as part of its basic financial statements, which it intends to post on its Web site at https://www.trs.texas.gov/Pages/about_publications.aspx.

We also issued a report on internal control over financial reporting and on compliance and other matters as required by auditing standards (that report, including responses from management, is presented in the attachment to this letter). In that report, auditors determined that the System should strengthen controls to help ensure the completeness and accuracy of the active employee census data that employers submit.

Our procedures were not intended to provide an opinion on internal control over financial reporting or to provide an opinion on compliance with laws and regulations. Accordingly, we do not express an opinion on the effectiveness of the System’s internal control over financial reporting or on compliance with laws and regulations.

Testing of Plan Member Census Data

Auditors conducted census data testing for fiscal year 2017 (see text box for the key data elements tested) as part of this audit. The completeness and accuracy of employees’ census data is important because the System uses that data to calculate the System’s liabilities for pensions and other post employment benefits.

Auditors implemented a risk-based approach for selecting employers (including school districts, charter schools, and higher education institutions) for fiscal year 2017 census data testing as required by American Institute of Certified Public Accountants (AICPA) guidance. That resulted in auditors selecting 91 employers for which census data was tested. (A list of the employers selected for testing is presented in the attachment to this letter.) Testing included reviewing documentation to verify that the census data that the employers submitted to the System was accurate.

Active Employee Census Data

Active employee census data is key demographic data that affects the actuarial estimate of the pension liability amount that the System presents in its financial statements.

Key data elements include:

Name.

Date of birth.

Service credits.

Pensionable earnings.

Gender.

Employment Status.

Source: Chapter 13 in State and Local Governments – Audit and Accounting Guide, American Institute of Certified Public Accountants.

https://www.trs.texas.gov/Pages/about_publications.aspx

Members of the Legislative Audit Committee November 27, 2017 Based on the testing performed, auditors determined that the underlying census data was materially complete and accurate to support the System’s plan’s financial statement amounts. That was reflected as part of our unmodified audit opinion on the System’s financial statements for fiscal year 2017. For fiscal year 2016, auditors tested the System’s census data using the same methodology described above and concluded that the data was materially complete and accurate. The System posted information on census data testing performed on its Web site at http://trs.texas.gov.

Additionally, auditors will be issuing an opinion later this fiscal year on the System’s fiscal year 2017 pension liability allocation schedules. Those schedules provide employers with the information they need to record their share of the pension liability in their financial statements, in accordance with AICPA requirements. Auditors previously issued an opinion on the System’s pension liability allocation schedules for fiscal year 2016. The System published our audit opinion, along with the pension liability allocation schedules, on its Web site at https://www.trs.texas.gov/Pages/re_gasb_67_68.aspx.

Other Issues

Auditors communicated certain issues that were not material or significant to the audit objectives separately in writing to the System’s management.

As required by auditing standards, we will also communicate to the System’s Board of Trustees certain matters related to the conduct of a financial statement audit.

We appreciate the System’s cooperation during this audit. If you have any questions, please contact Michael Owen Clayton, CPA, CISA, CFE, CIDA Audit Manager, or me at (512) 936-9500.

Sincerely,

Lisa R. Collier, CPA, CFE, CIDA First Assistant State Auditor

Attachment

cc: The Honorable Greg Abbott, Governor Members of the Teacher Retirement System Board of Trustees

Mr. R. David Kelly, Chairman Ms. Dolores Ramirez, Vice Chair Ms. T. Karen Charleston Mr. Joe Colonnetta Mr. David Corpus Mr. John Elliott Dr. Greg Gibson Mr. Christopher Moss

Mr. Brian Guthrie, Executive Director, Teacher Retirement System

http://trs.texas.gov/

https://www.trs.texas.gov/Pages/re_gasb_67_68.aspx

This document is not copyrighted. Readers may make additional copies of this report as needed. In addition, most State Auditor’s Office reports may be downloaded from our Web site: www.sao.texas.gov. In compliance with the Americans with Disabilities Act, this document may also be requested in alternative formats. To do so, contact our report request line at (512) 936-9500 (Voice), (512) 936-9400 (FAX), 1-800-RELAY-TX (TDD), or visit the Robert E. Johnson Building, 1501 North Congress Avenue, Suite 4.224, Austin, Texas 78701. The State Auditor’s Office is an equal opportunity employer and does not discriminate on the basis of race, color, religion, sex, national origin, age, or disability in employment or in the provision of services, programs, or activities. To report waste, fraud, or abuse in state government call the SAO Hotline: 1-800-TX-AUDIT.

Attachment A Report on the Audit of the Teacher Retirement System’s Fiscal Year 2016 Financial Statements

SAO Report No. 18-005 November 2017

Page 1

Attachment

Section 1

List of Employers Selected for Census Data Testing

Table 1 lists the 91 employers for which auditors tested the accuracy of census data to determine whether that data was materially complete and accurate to support the Teacher Retirement System’s plan’s financial statement amounts.1

Table 1

List of Employers Selected for Census Data Testing for Fiscal Year 2017

Alvarado Independent School District

Anahuac Independent School District

Argyle Independent School District

Bandera Independent School District

Bay City Independent School District

Bishop Consolidated Independent School District

Bonham Independent School District

Brady Independent School District

Brownfield Independent School District

Brownsboro Independent School District

Brownsville Independent School District

Bushland Independent School District

Central Texas College

Cisco Independent School District

City View Independent School District

Coastal Bend College

Coldspring-Oakhurst Consolidated Independent School District

Commerce Independent School District

Conroe Independent School District

Crowley Independent School District

Cuero Independent School District

Dallas Independent School District

Dayton Independent School District

Deer Park Independent School District

East Chambers Independent School District

Edcouch-Elsa Independent School District

Edinburg Consolidated Independent School District

Ferris Independent School District

1 Auditors followed the American Institute of Certified Public Accountants’ sampling guide methodology and selected a representative population of employees from each employer selected for testing.



Page 2


Fort Worth Independent School District

Gladewater County Line Independent School District

Glen Rose Independent School District

Goose Creek Consolidated Independent School District

Granbury Independent School District

Greenville Independent School District

Groveton Independent School District

Hillsboro Independent School District

Houston Independent School District

Humble Independent School District

Jacksboro Independent School District

Jim Hogg County Independent School District

Joshua Independent School District

Junction Independent School District

Kermit Independent School District

Klein Independent School District

La Joya Independent School District

La Porte Independent School District

Life School

Livingston Independent School District

Llano Independent School District

Mission Consolidated Independent School District

Montgomery Independent School District

Muleshoe Independent School District

Navasota Independent School District

Northwest Independent School District

Pharr-San Juan-Alamo Independent School District

Pine Tree Independent School District

Plano Independent School District

Princeton Independent School District

Promise Community School

Red Oak Independent School District

Region 1 Education Service Center



Rio Hondo Independent School District

Royal Independent School District

Royse City Independent School District

San Angelo Independent School District

San Elizario Independent School District

Santa Fe Independent School District

Snyder Independent School District

Southwest High School

Southwest Texas Junior College

Stafford Municipal School District

Taylor Independent School District



Page 3


Temple College

Terrell Independent School District

Texas A&M Transportation Institute

Texas A&M University System

Texas City Independent School District

The University of Texas at Austin

The University of Texas Health Science Center at San Antonio

The University of Texas Health Science Center at Tyler

The University of Texas M.D. Anderson Cancer Center

The University of Texas Southwestern Medical Center

Tomball Independent School District

Trinity Basin Preparatory

United Independent School District

West Orange Cove Consolidated Independent School District

White Settlement Independent School District

Whitehouse Independent School District

Winters Independent School District



Page 4

Section 2

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters as Required by Auditing Standards



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